REG - Investec PLC - Final Results
18/05/2023 07:00
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RNS Number : 8002Z Investec PLC 18 May 2023
Investec Limited Investec plc
Incorporated in the Republic of South Africa Incorporated in England and Wales
Registration number 1925/002833/06
Registration number 3633621
JSE share code: INL
LSE share code: INVP
NSX share code: IVD JSE share code: INP
ISIN: GB00B17BBQ50
BSE share code: INVESTEC LEI: 2138007Z3U5GWDN3MY22
ISIN: ZAE000081949
LEI: 213800CU7SM6O4UWOZ70
Investec (comprising Investec plc and Investec Limited) - Unaudited combined
consolidated financial results for the year ended 31 March 2023
Group results summary for the year ended 31 March 2023 (FY2023) compared to
31 March 2022 (FY2022)
• The Group achieved strong financial performance amidst a complex
macroeconomic backdrop that prevailed throughout the financial year
• Adjusted earnings per share increased 25.0% to 68.9p (FY2022: 55.1p),
at the upper end of previous guidance
• Funds under management (FUM) decreased 4.5% to £61.0 billion (FY2022:
£63.8 billion) largely reflecting the unfavourable market movements. Net
inflows were £377 million, with £810 million inflows in discretionary FUM
partly offset by £433 million net outflows in non-discretionary FUM
• Net core loans increased to £30.2 billion (FY2022: £29.9 billion)
increasing 7.7% in neutral currency; largely driven by corporate lending and
residential mortgage lending in both core geographies
• Customer accounts (deposits) increased 5.8% in constant currency, and
decreased by 1.4% to £39.6billion on reported basis
• Revenue grew 14.6%, benefitting from higher global interest rates and
loan growth, which was underpinned by client acquisition and increased client
activity. Fee and commission income was negatively impacted by the
unfavourable market movements and weakening macro backdrop
• The cost to income ratio improved to 59.6% (FY2022: 63.3%) as
operating costs grew by 9.5%. Fixed operating expenditure increased by 11.3%,
due to inflationary pressures, continued investment in people and technology
to support growth, and post-pandemic normalisation in certain discretionary
spend
• Pre-provision adjusted operating profit increased 28.0% to £917.0
million (FY2022: £716.2 million), supported by the diversity of our revenue
streams
• Asset quality remained strong with exposures well covered by
collateral. Expected credit loss (ECL) impairment charges increased to £81.1
million (FY2022: £28.8 million), resulting in a credit loss ratio (CLR) of
23bps (FY2022: 8bps), and approaching the lower end of the Group's
through-the-cycle (TTC) range of 25bps to 35bps
• Return on equity (ROE) was 13.7% (FY2022: 11.4%) and return on
tangible equity (ROTE) was 14.7% (FY2022: 12.3%)
• Tangible net asset value (TNAV) per share remained broadly flat at
474.3p (FY2022: 476.6p). Net asset value (NAV) per share was 510.0p (FY2022:
510.0p) notwithstanding the return to shareholders of 64p per share through
the distribution of a 15% shareholding in Ninety One, dividends, and the share
purchase programme
• The Group continued to execute on its strategic priorities to grow
with discipline and implemented a number of capital optimisation strategies
• Post the year-end, Investec announced the all-share combination of
Investec Wealth & Investment UK (IW&I UK) with Rathbones plc to create
the UK's leading discretionary wealth manager with approximately £100 billion
in funds under management and administration
• Maintained strong capital and liquidity positions allowing us to
navigate the current volatile and uncertain environment, and support
identified growth initiatives
• The Board has proposed a final dividend of 17.5p per share, resulting
in a full year dividend of 31.0p (FY2022: 25.0p). The payout ratio of 45.0% is
within the Group's 30% to 50% payout range.
Fani Titi, Group Chief Executive commented:
"The Group reported strong results in a challenging macro backdrop, with all
our client franchises reporting growth in pre-provision adjusted operating
profit. Our focused approach to support our clients and the diversified nature
of our revenue streams underpinned the financial performance. We achieved
adjusted earnings per share of 68.9p, a 25.0% growth on prior year and made
significant progress against the strategic goals outlined in 2019, with the
Group's ROE well within the 12% to 16% target range set out for achievement in
FY2024.
During the period under review, we returned approximately £780 million to
shareholders, comprising ordinary dividends, the share purchase programme to
optimise the SA balance sheet and the distribution of a 15% shareholding in
Ninety One.
The strong capital generation across the Group allows us to maintain robust
capital and liquidity levels, deliver improved returns to our shareholders,
and support our clients, colleagues, and societies through an uncertain
economic environment. We are proud of the progress we are making to entrench
sustainability across every aspect of our business."
Key financial data
This announcement covers the results of Investec plc and Investec Limited
(together "the Investec Group" or "Investec" or "the Group") for the year
ended 31 March 2023 (FY2023). Unless stated otherwise, comparatives relate to
the Group's operations for the year ended 31 March 2022 (FY2022). The average
Rand/Pound Sterling exchange rate depreciated by c.1% relative to FY2022, and
the closing exchange rate depreciated by 14.0%.
Basic earnings per share were positively impacted by a gain of £155.1 million
on implementation of the distribution of a 15% shareholding in Ninety One to
shareholders on 30 May 2022.
Performance FY2023 FY2022 Variance % Neutral currency
change % change
Total operating income before expected credit losses (£'m) 2 280.4 1 990.4 290.1 14.6% 14.8%
Operating costs (£'m) (1 350.8) (1 233.9) (116.9) 9.5% 9.9%
Adjusted operating profit (£'m) 835.9 687.4 148.5 21.6% 21.9%
Adjusted earnings attributable to shareholders (£'m) 614.4 505.2 109.2 21.6% 21.8%
Adjusted basic earnings per share (pence) 68.9 55.1 13.8 25.0% 25.3%
Basic earnings per share (pence) 85.8 52.0 33.8 65.0% 65.0%
Headline earnings per share (pence) 66.8 53.3 13.4 25.3% 25.5%
Dividend per share (pence) 31.0 25.0 6.0 24.0%
Dividend payout ratio 45.0% 45.4%
CLR (credit loss ratio) 0.23% 0.08%
Cost to income ratio 59.6% 63.3%
ROE (return on equity) 13.7% 11.4%
ROTE (return on tangible equity) 14.7% 12.3%
Balance sheet FY2023 FY2022 Variance % change Neutral currency % change
Funds under management (£'bn) 61.0 63.8 (2.8) (4.5%) (0.4%)
Customer accounts (deposits) (£'bn) 39.6 40.1 (0.6) (1.4%) 5.8%
Net core loans and advances (£'bn) 30.2 29.9 0.2 0.8% 7.7%
Cash and near cash (£'bn) 16.4 17.2 (0.8) (4.7%) 1.7%
NAV per share (pence) 510.0 510.0 - -% 4.6%
TNAV per share (pence) 474.3 476.6 (2.3) (0.5%) 4.7%
Salient features by geography FY2023 FY2022 Variance % change % change in Rands
Investec Limited (Southern Africa)
Adjusted operating profit (£'m) 440.9 384.6 56.3 14.6% 14.9%
Cost to income ratio 53.0% 54.8%
ROE 14.8% 11.5%
ROTE 14.9% 11.6%
CET1 14.7% 14.0%
Leverage ratio 6.5% 7.4%
Customer accounts (deposits) (£'bn) 20.4 21.8 (1.4) (6.4%) 6.8%
Net core loans and advances (£'bn) 14.6 15.5 (0.9) (5.8%) 7.5%
Investec plc (UK & Other)
Adjusted operating profit (£'m) 395.0 302.8 92.2 30.5% n/a
Cost to income ratio 64.5% 70.0%
ROE 12.7% 11.3%
ROTE 14.5% 13.1%
CET1 12.0% 11.7%
Leverage ratio 9.4% 9.2%
Customer accounts (deposits) (£'bn) 19.1 18.3 0.8 4.5%
Net core loans and advances (£'bn) 15.6 14.4 1.2 7.9%
Strategy execution
Combination of Investec Wealth & Investment UK (IW&I UK) with
Rathbones
On 4 April 2023, the Group announced it had reached agreement on a proposed
all-share combination of IW&I UK with Rathbones to create the UK's leading
discretionary wealth manager (the "Enlarged Rathbones Group") (the
"Combination"). The Enlarged Rathbones Group will have approximately £100
billion in funds under management and administration ("FUMA"), delivering the
scale that will underpin future growth. The Combination establishes a
long-term, strategic partnership between the Enlarged Rathbones Group and
Investec Group, which will enhance the client proposition across banking and
wealth management services for both groups. The Combination represents a
significant value creation opportunity for both Investec Group and Rathbones
stakeholders. Under the terms of the agreement, Investec will own 41.25% of
the Enlarged Rathbones Group in which it will be a long-term strategic
shareholder, participating in the anticipated value creation from the
combination including identified banking opportunities. The Combination is
subject to, among other things, Rathbones shareholder and regulatory
approvals. Completion is expected to occur in early Q4 2023 (subject to
approvals). The full announcement can be found here
www.investec.com/content/dam/investor-relations/presentations-and-announcements/Investec-Announcement.pdf
(file:///C%3A/Users/helenohara/Desktop/HOH%20Temporary/_2022%20Reports/Investec_2023_AR/_2023_Finals/DLC%20Sens%20Word/www.investec.com/content/dam/investor-relations/presentations-and-announcements/Investec-Announcement.pdf)
.
Capital optimisation
Investec has made significant progress in its capital optimisation strategy.
To date, the Group has acquired c.52 million INL and INP shares or an
equivalent of c.5.2% of the shares outstanding before the November 2022
announcement of the share purchase and share buy-back programme; and returned
c.R5.5 billion or £245 million to shareholders through this programme. In
South Africa, Investec Limited received approval to commence capital
measurement for the income producing real estate portfolio under the advanced
internal ratings based (AIRB) approach, resulting in 242bps uplift to the CET
1 ratio at implementation.
Investec Equity Partners (IEP) Group restructure
As disclosed to shareholders in the September 2022 interim results:
• The IEP Group and Bud Group shareholders have approved a restructure
to facilitate an exit by certain IEP shareholders, including Investec, by way
of a share buyback. The restructure entails the transfer of certain assets to
a Newco, to facilitate the orderly disposal of those assets
• Newco had entered into binding transaction agreements to dispose of
certain chemical assets ("Chemical Asset Sale")
Shareholders are advised that the Chemical Asset Sale closed during the
reporting period ended 31 March 2023, and on the back of this transaction as
well as additional transactions pursuant to the IEP and Bud Group restructure,
c.R810 million cash proceeds were received by Investec Limited in FY2023. Post
year end, an additional R183 million has been received. The carrying value of
the shareholding in IEP as at 31 March 2023 was R4.7 billion (FY2022: R5.4
billion).
The balance of the asset disposal process is anticipated to conclude over the
next 18 months, subject to market conditions.
Investec Property Fund (IPF) internalisation
Post Investec Group's year-end, IPF shareholders approved the internalisation
of the management company (Manco) which we believe will position the IPF
platform well to unlock shareholder value in the long term This is subject to
regulatory approval, including the Competition Authorities. Closing is
expected to occur in Q3 2023.
Outlook
The Group is well positioned to continue supporting its clients
notwithstanding the uncertain macroeconomic outlook. We have strong capital
and robust liquidity levels to navigate the current environment and pursue our
identified growth initiatives in our chosen markets.
FY2024 guidance
Based on the macroeconomic outlook for our two core geographies, the Group
currently expects:
• Revenue outlook to be underpinned by moderate book growth, continued
elevated interest rates and client activity levels
• Overall costs to be contained with cost to income ratio of
approximately 60%, despite inflationary pressures and continued investment in
the business
• A normalisation of credit loss ratio to inside the through-the-cycle
(TTC) range of 25bps to 35bps
• Capital optimisation strategies to continue as well as progress on IEP
• ROE to be around the mid-point of the Group's current target range of
12% to 16%.
Enquiries
Investec Investor Relations
Results: Qaqambile Dwayi
Tel: +27 (0) 11 291 0129
General enquiries:
Tel: +27 (0) 11 286 7070 or investorrelations@investec.com
Brunswick (SA PR advisers)
Graeme Coetzee
Tel: +27 (0) 63 685 6053
Lansons (UK PR advisers)
Tom Baldock
Tel: +44 (0) 78 6010 1715
Presentation/conference call details
Investec management will host its annual results presentation live from
Johannesburg on Thursday 18 May at 10h00 (SA)/9h00 (UK) time.
Please register for the presentation at: www.investec.com/investorrelations
A live video webcast of the presentation will be available on www.investec.com
About Investec
Investec partners with private, institutional, and corporate clients, offering
international banking, investments, and wealth management services in two
principal markets, South Africa, and the UK, as well as certain other
countries. The Group was established in 1974 and currently has 8,500+
employees.
Investec has a dual listed company structure with primary listings on the
London and Johannesburg Stock Exchanges.
Johannesburg and London
Sponsor: Investec Bank Limited
Group financial performance
Overview
Pre-provision adjusted operating profit increased, supported by continued
client acquisition resulting in higher average advances, rising interest rates
and increased client activity. Fee and commission income in our Wealth &
Investment businesses was negatively impacted by the effects of the market
sell off on average FUM.
Fixed operating expenditure reflects inflationary pressures, continued
investment in technology and people and post-pandemic normalisation in certain
business expenses.
Impairments were driven by updated forward-looking macroeconomic scenarios
since FY2022, and Stage 3 ECL charges. A portion of post-model management
overlays raised since the onset of COVID-19 for potential risk migration have
been released and now catered for in-model. Recoveries of previously written
off exposures remained high in South Africa.
Pre-provision adjusted operating profit increased 28.0% to £917 million
(FY2022: £716.2 million)
Revenue increased 14.6% to £2 280.4 million (FY2022: £1 990.4 million)
Net interest income increased 37.1% to £1 295.8 million (FY2022: £945.3
million) driven by higher average interest earning assets and rising interest
rates.
Non-interest revenue (NIR) decreased 5.8% to £984.7 million (FY2022: £1
045.1 million).
• Net fee and commission income decreased 4.7% to £779.4 million
(FY2022: £818.2 million), reflecting lower fee income from Wealth &
Investment and UK equity capital markets given market volatility and
uncertainty during the year, partly offset by higher fees from increased
client activity in South Africa
• Investment loss of £17.1 million (FY2022: £28.0 million gain)
reflects fair value adjustments of £55.3 million within the Group Investment
portfolio, primarily in IPF's investment properties, partly offset by
dividends received and realised gains on disposal of investments
• Share of post-taxation profit of associates and joint venture holdings
decreased to £29.1 million (FY2022: £79.6 million), largely driven by:
- Lower share of associate earnings following the distribution of Ninety
One in May 2022 when it ceased to be classified as an associate, partly offset
by
- Higher share of earnings from IEP given improvement in the operational
performance of the underlying investee companies within IEP, before it ceased
to be classified as an associate on 30 November 2022
• Trading income arising from customer flow increased by 2.3% to £131.2
million from £128.3 million in the prior year. Positively impacted by 31.6%
increase in trading income from our banking franchises on the back of
increased client activity. This was partly offset by mark-to-market (MTM) loss
of £11.3 million on IPF balance sheet hedging activities compared to a gain
in the prior year
• Net trading gains arising from balance sheet management and other
trading activities were £57.7 million compared to a loss of (£21.1 million)
in the prior year. The gains arise from MTM movements in the value of currency
and interest rate hedges on the balance sheet
• Other operating income of £4.4 million (FY2022: £12.2 million
income) includes fair value movements on instruments held to meet non-equity
settled share schemes. The corresponding liability is reflected in other
liabilities with changes in the value of the liability expensed through staff
expenses in operating costs.
Expected credit loss (ECL) impairment charges increased by £52.3 million to
£81.1 million (FY2022: £28.8 million) resulting in a credit loss ratio of
23bps (FY2022: 8bps)
Asset quality remains strong, with exposures to a carefully defined target
market well covered by collateral. The ECL increase was primarily driven by
the deterioration in forward-looking macroeconomic outlook since March 2022
and Stage 3 ECL impairment charges. The Group has maintained a lower level of
post-model management overlays to account for risks assessed as inadequately
reflected in the models.
Operating costs increased 9.5% to £1 350.8 million (FY2022: £1 233.9
million)
Fixed operating expenditure increased by 11.3% due to inflationary pressures,
investment in technology and people and post-pandemic normalisation in
discretionary expenditure. The cost to income ratio improved to 59.6% from
63.3% in FY2022.
Since March 2019, fixed costs increased 3.4%, while revenue grew by 16.7%
reflecting the heightened focus on cost discipline whilst growing scale in our
chosen franchises.
Taxation
The taxation charge on adjusted operating profit was £179.7 million (FY2022:
£143.3 million), resulting in an effective tax rate of 21.9% (FY2022: 22.1%).
In the UK, the effective tax rate is 19.9% (FY2022: 14.7%), the prior period
is mainly driven by higher deferred tax assets on the back of higher tax
rates.
SA's effective tax rate is 23.7% (FY2022: 26.9%). The prior year higher tax
rate in SA relates to a release of certain deferred tax assets held in our
property division.
Funding and liquidity
Customer deposits increased by 5.8% in neutral currency and decreased 1.4% to
£39.6 billion (FY2022: £40.1 billion) at 31 March 2023 on a reported basis.
Customer deposits increased by 4.5% to £19.1 billion for Investec plc and
increased by 6.8% to R448.5 billion for Investec Limited. Cash and near cash
of £16.4 billion (£8.6 billion in Investec plc and R171.4 billion in
Investec Limited) at 31 March 2023 represent approximately 41.4% of customer
deposits. Loans and advances to customers as a percentage of customer deposits
was 75.6%.
The Group comfortably exceeds Basel liquidity requirements for the Liquidity
Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR).
• Investec Bank Limited (consolidated Group) ended the period to 31
March 2023 with the three-month average of its LCR at 153.6% and an NSFR of
116.4%
• Investec plc reported a LCR of 383% and a NSFR of 147% at 31 March
2023.
Capital adequacy and leverage ratios
Capital and leverage ratios remain sound, ahead of Board-approved minimum
targets and regulatory requirements. The CET1 and leverage ratio were 14.7%
and 6.5% for Investec Limited (increased Internal Ratings Based scope) and
12.0% and 9.4% for Investec plc (Standardised approach) respectively.
Segmental performance
Wealth & Investment
Adjusted operating profit from the Wealth & Investment businesses
increased 1.1% to £124.6 million (FY2022: £123.1 million), positively
impacted by the net inflows in discretionary FUM and rising global interest
rates, partly offset by the effects of unfavourable market levels on fees in
the year under review.
Wealth & Investment Southern Africa UK & Other Total
FY2023 FY2022^ Variance FY2023 FY2022^ Variance FY2023 FY2022^
£'m £'m £'m % % in Rands £'m £'m £'m % £'m £'m
Operating income 120.2 115.5 4.7 4.1% 5.5% 347.7 338.3 9.3 2.8% 467.8 453.8
Operating costs (87.4) (82.9) (4.4) 5.3% 7.0% (255.9) (247.7) (8.2) 3.3% (343.3) (330.7)
Adjusted operating profit 32.8 32.5 0.3 0.8% 1.8% 91.8 90.6 1.2 1.3% 124.6 123.1
^ Restated. Following a strategic review, our Swiss operations
have been earmarked to play a key role in the Group's strategic expansion of
its international wealth services. To ensure strategic alignment, the results
of the Switzerland wealth business are now reported as part of the Southern
Africa Wealth & Investment business (previously reported as part of the UK
& Other Wealth & Investment business). The comparative period has been
restated to reflect this change. There has been no change in the legal or
ownership structures.
Southern Africa Wealth & Investment (in Rands)
Adjusted operating profit increased by 1.8% to R672 million (FY2022: R660
million).
Total FUM increased by 10.4% to R435.1 billion (FY2022: R394.0 billion) driven
by discretionary and annuity net inflows of R5.9 billion, and the net impact
from positive foreign currency translation gains. Non-discretionary FUM
reported net outflows of R10.6 billion in the current year.
Revenue grew by 5.5% underpinned by inflows into local investment products in
the current year and offshore investment products in the prior year in
discretionary and annuity portfolios. Non-discretionary brokerage decreased
markedly in the current period due to lower trading volumes given market
volatility.
Operating costs increased 7.0%, influenced by continued investment in the
platform, as well as post-pandemic normalisation of business expenses.
Operating margins decreased to 27.3% from 28.2% in FY2022.
UK & Other Wealth & Investment
Adjusted operating profit increased 1.3% to £91.8 million (FY2022: £90.6
million) with higher net interest income from rising global interest rates
offset by lower net fees and commission income given unfavourable market
levels and subdued net inflows.
FUM decreased by 5.0% to £40.7 billion impacted by declining market levels
since 31 March 2022 (FY2022: £42.9 billion). Net inflows were £608 million
translating to a net organic growth in FUM of 1.4%. The extent of market
volatility and the inflationary environment resulted in reduced appetite
amongst existing clients to invest new funds, negatively impacting both net
inflows and fee income.
Revenue increased by 2.8%, driven by positive net inflows in the current and
prior years, along with higher net interest income. Fee income decreased year
on year due to lower market levels. Commission based income was also
negatively impacted by the market conditions
Operating costs were up 3.3% due to inflationary pressures and the
post-pandemic normalisation in certain discretionary expenditure. Operating
margin was 25.8% (FY2022: 27.0%).
Specialist Banking
Adjusted operating profit from Specialist Banking increased 33.9% to £727.1
million (FY2022: £543.0 million). Pre-provision adjusted operating profit
increased 41.4% to £808.0 million (FY2022: £571.3 million).
Specialist Banking Southern Africa UK & Other Total
FY2023 FY2022 Variance FY2023 FY2022 Variance FY2023 FY2022
£'m £'m £'m % % in Rands £'m £'m £'m % £'m £'m
Operating income (before ECL) 846.1 721.7 124.4 17.2% 18.2% 933.7 720.4 213.3 29.6% 1 779.8 1 442.0
ECL impairment charges (14.1) (3.1) (11.1) >100.0% >100.0% (66.7) (25.2) (41.5) >100.0% (80.8) (28.2)
Operating costs (407.5) (369.0) (38.5) 10.4% 11.4% (563.6) (501.6) (62.0) 12.4% (971.0) (870.5)
(Profit)/loss attributable to NCI (0.8) (0.3) (0.5) >100.0% >100.0% - - - -% (0.8) (0.3)
Adjusted operating profit 423.8 349.4 74.4 21.3% 22.0% 303.4 193.7 109.7 56.7% 727.1 543.0
Southern Africa Specialist Banking (in Rands)
Adjusted operating profit increased 22% to R8 668 million (FY2022: R7 104
million).
Revenue increased 18.2%, and was positively impacted by higher average
interest earning assets, rising interest rates, increased client activity and
continued client acquisition in line with our growth strategy. This was
augmented by positive investment income.
Net interest income increased 19.1% driven by higher average interest earning
assets and rising interest rates.
Non-interest revenue increased 16.4% driven by:
• Higher fee income from increased activity levels in all our client
franchises, including utilisation of trade finance facilities and higher
investment banking fees.
• Investment income largely benefitted from non-repeat of prior year
negative FV adjustments.
• Trading income from customer flow reflects increased client activity
given heightened volatility and rising interest rates.
• Balance sheet management and other trading activities reflects net
foreign currency translation gains on non-Rand denominated monetary assets and
liabilities. This was partly offset by mark-to-market (MTM) losses on certain
interest rate, currency swaps.
Partially offset by:
• Other negatively impacted by MTM losses on instruments held to meet
non-equity settled share schemes.
ECL impairment charges increased to R289 million from R51 million in the prior
year. The credit loss ratio on core loans subject to ECL was 8bps (FY2022:
Nil), primarily driven by the idiosyncratic Stage 3 ECL charges on certain
exposures. Post-model management overlays of R106 million were released, with
R113 million retained to account for emerging risks assessed as inadequately
reflected in the forward-looking model. Released overlays were previously held
for anticipated migration risk in Private Bank are now catered for in-model.
ECL charged was positively impacted by the reversal of impairments and
recoveries on previously impaired loans.
The cost to income ratio was 48.2% (FY2022: 51.1%). Operating costs increased
11.4% driven by higher personnel expenses due to salary increases, increased
headcount, variable remuneration and the post-pandemic normalisation of
discretionary expenditure. Fixed costs increased 14.8%, this follows periods
of well contained cost growth, resulting in a 5.5% compounded annual growth
rate since 31 March 2019.
Net core loans grew by 7.5% to R320.7 billion (FY2022: R298.4 billion).
Corporate lending portfolios grew by 20.7% since 31 March 2022, driven by
increased corporate credit demand across our lending specialisations. Advances
to private clients reported subdued growth of 2.6% year to date with a
reasonable growth in residential mortgages.
UK & Other Specialist Banking
Adjusted operating profit increased by 56.7% to £303.4 million (FY2022:
£193.7 million) driven by strong revenue growth across our lending franchises
and increased client trading income from customer flow given heightened market
volatility during the year.
Net interest income increased 47.5% driven by higher average interest earning
assets and the positive effect of rising global interest rates.
Non-interest revenue decreased by 6.3% due to:
• Lower fees from equity capital markets partially offset by higher
advisory fees from Growth and Leveraged Finance and Fund Solutions
• Lower investment income of £5.0 million due to fair value adjustments
on investments and lower dividend income
Partly offset by
• Trading income from customer flow increased 45.5% over the prior
period reflecting strong client activity levels in our interest rate and
currency desks given market volatility
• Trading income from balance sheet management and other trading
activities increased >100% reflecting the positive positioning in balance
management activities.
ECL impairment charges totalled £66.7 million, resulting in a credit loss
ratio of 37bps (FY2022: 17bps). The increase in ECL charges was driven by an
increase in modelled ECLs due to forward-looking macro-economic assumptions
and Stage 3 ECL charges on certain exposures. Post-model management overlay of
£11.9 million raised since the onset of the COVID-19 pandemic was released,
with £4.9 million retained to account for risks judged as not reflected
in-model. Released post-model overlays are now captured in-model..
The cost to income ratio improved to 60.4% (FY2022: 69.6%). Operating costs
increased by 12.4% year on year primarily driven by an increase in variable
remuneration in line with business performance, inflationary pressures and
investment in people and technology. Fixed operating costs increased below the
UK inflation rate at 8.4%. The fixed operating costs trajectory since March
2019 reflects the impact of various strategic actions; with FY2023 costs 4.3%
below March 2019 costs while revenue is 22.9% higher over the same period.
Net core loans grew by 7.9% to £15.6 billion since 31 March 2022 driven by
residential mortgages and strong demand for corporate credit across multiple
portfolios which was offset by higher redemptions in the current year.
Residential mortgages also had higher redemptions in the second half of the
financial year.
Group Investments
Group Investments includes the holding in Ninety One, the IEP Group, Investec
Property Fund (IPF) and other equity investments.
Group Investments Southern Africa UK & Other Total
FY2023 FY2022 Variance FY2023 FY2022 Variance FY2023 FY2022
£'m £'m £'m % % in Rands £'m £'m £'m % £'m £'m
Operating income (net of ECL charges) 14.5 60.5 (46.1) (76.2%) (83.9%) 18.1 33.4 (15.3) 32.6 93.9
(45.8%)
Operating costs (3.0) (1.9) (1.0) 52.1% 55.6% - - - - (3.0) (1.9)
(Profit) attributable to NCI (11.8) (39.9) 28.1 (70.4%) (77.1%) - - - - (11.8) (39.9)
Adjusted operating profit (0.3) 18.7 (19.0) (>100%) (>100%) 18.1 33.4 (15.3) (45.8%) 17.8 52.1
Adjusted operating profit from Group Investments decreased by 65.8% to £17.8
million (FY2022: £52.1 million) driven by:
• Lower share of associate earnings from Ninety One following the 15%
distribution in May 2022 and consequent derecognition as an investment in
associate.
• Net fair value adjustments on IPF's investment property portfolio.
• Negative fair value adjustment to IEP's carrying value to align it
with realisable value.
Partially offset by
• Continued improvement in the operational performance of the underlying
investee companies within IEP.
Further information
Additional information on each of the business units is provided in the Group
interim results analyst book published on the Group's website:
http://www.investec.com.
On behalf of the boards of Investec plc and Investec Limited
Philip Hourquebie Fani Titi
Chair Group Chief Executive
17 May 2023
Notes to the commentary section above
Presentation of financial information
Investec operates under a Dual Listed Companies (DLC) structure with primary
listings of Investec plc on the London Stock Exchange and Investec Limited on
the JSE Limited.
In terms of the contracts constituting the DLC structure, Investec plc and
Investec Limited effectively form a single economic enterprise from a
shareholder perspective, in which the economic and voting rights of ordinary
shareholders of the companies are maintained in equilibrium relative to each
other. Creditors, however, are ring-fenced to either Investec plc or Investec
Limited as there are no cross-guarantees between the companies.The directors
of the two companies consider that for financial reporting purposes, the
fairest presentation is achieved by combining the results and financial
position of both companies.
Accordingly, these year end results reflect the results and financial position
of the combined DLC Group under UK adopted International Financial Reporting
Standards (IFRS) which comply with IFRS as issued by the International
Accounting Standards Board (IASB) and the (EC) No. 1606/2022 as it applies in
the European Union, denominated in Pounds Sterling. In the commentary above,
all references to Investec or the Group relate to the combined DLC Group
comprising Investec plc and Investec Limited.
Following a review of the liquidity, capital position, profitability, the
business model and operational risks facing the business, the directors have a
reasonable expectation that the Investec Group will be a going concern for a
period of at least 12 months. The results for the year ended 31 March 2023
have accordingly been prepared on the going concern basis.
Unless the context indicates otherwise, all comparatives included in the
commentary above relate to the year ended 31 March 2022.
Amounts represented on a neutral currency basis for income statement items
assume that the relevant average exchange rates for the year ended 31 March
2023 remain the same as those in the prior year. Amounts represented on a
neutral currency basis for balance sheet items assume that the relevant
closing exchange rates at 31 March 2023 remain the same as those at 31 March
2022.
Neutral currency information is considered as pro-forma financial information
as per the JSE Listings Requirements and is therefore the responsibility of
the Group's Board of Directors. Pro-forma financial information was prepared
for illustrative purposes and because of its nature may not fairly present the
issuer's financial position, changes in equity, or results of operations.The
external auditors of Investec Limited performed a review of the pro-forma
financial information and the opinion is available for inspection at the
registered offices of Investec Limited and Investec plc upon request.
Foreign currency impact
The Group's reporting currency is Pounds Sterling. Certain of the Group's
operations are conducted by entities outside the UK. The results of operations
and the financial condition of these individual companies are reported in the
local currencies in which they are domiciled, including Rands, Australian
Dollars, Euros, US Dollars and Indian Rupee. These results are then translated
into Pounds Sterling at the applicable foreign currency exchange rates for
inclusion in the Group's combined consolidated financial statements. In the
case of the income statement, the weighted average rate for the relevant
period is applied and, in the case of the balance sheet, the relevant closing
rate is used.
The following table sets out the movements in certain relevant exchange rates
against Pounds Sterling over the period:
Year ended Year ended
31 March 2023 31
Ma
rc
h
20
22
Currency Closing Average Closing Average
per GBP1.00
South African Rand 21.94 20.45 19.24 20.28
Euro 1.14 1.16 1.18 1.18
US Dollar 1.24 1.21 1.31 1.37
Profit Forecast
The following matters highlighted in this announcement contain forward-looking
statements:
• Revenue outlook is underpinned by book growth, elevated interest rates
and client activity levels
• Overall costs to be contained with cost to income of approximately
60%, despite inflationary pressures and continued investment in the business
• A normalisation of ECL charges to inside the through-the-cycle (TTC)
range of 25bps to 35bps
• Capital optimisation strategies to continue and progress on IEP
expected
• ROE to be around mid-range of the Group's current target range of 12%
to 16%.
The basis of preparation of this statement and the assumptions upon which it
was based are set out below. This statement is subject to various risks and
uncertainties and other factors - these factors may cause the Group's actual
future results, performance or achievements in the markets in which it
operates to differ from those expressed in this Profit Forecast.
Any forward-looking statements made are based on the knowledge of the Group at
17 May 2023.
This forward-looking statement represents a profit forecast under the Listing
Rules. The Profit Forecast relates to the year ending 31 March 2024.
The financial information on which the Profit Forecast was based is the
responsibility of the Directors of the Group and has not been reviewed and
reported on by the Group's auditors.
Basis of preparation
The Profit Forecast has been properly compiled using the assumptions stated
below, and on a basis consistent with the accounting policies adopted in the
Group's 31 March 2022 audited annual financial statements, which are in
accordance with IFRS.
Assumptions
The Profit Forecast has been prepared on the basis of the following
assumptions during the forecast period:
Factors outside the influence or control of the Investec Board:
• There will be no material change in the political and/or economic
environment that would materially affect the Investec Group
• There will be no material change in legislation or regulation
impacting on the Investec Group's operations or its accounting policies
• There will be no business disruption that will have a significant
impact on the Investec Group's operations, whether for the economic effects of
increased geopolitical tensions or otherwise
• The Rand/Pound Sterling, Euro/Pound, INR/Pound and US Dollar/Pound
Sterling exchange rates and the tax rates remain materially unchanged from the
prevailing rates detailed above
• There will be no material changes in the structure of the markets,
client demand or the competitive environment
• There will be no material change to the facts and circumstances
relating to legal proceedings and uncertain tax matters.
Estimates and judgements
In preparation of the Profit Forecast, the Group makes estimations and applies
judgement that could affect the reported amount of assets and liabilities
within the reporting period. Key areas in which judgement is applied include:
• Valuation of unlisted investments primarily in private equity, direct
investments portfolios and embedded derivatives. Key valuation inputs are
based on the most relevant observable market inputs, adjusted where necessary
for factors that specifically apply to the individual investments and
recognising market volatility
• The determination of ECL against assets that are carried at amortised
cost and ECL relating to debt instruments at fair value through other
comprehensive income (FVOCI) involves the assessment of future cash flows
which is judgmental in nature
• Valuation of investment properties is performed by capitalising the
budget net income of the property at the market related yield applicable at
the time.
• The Group's income tax charge and balance sheet provision are
judgmental in nature. This arises from certain transactions for which the
ultimate tax treatment can only be determined by final resolution with the
relevant local tax authorities. The Group recognises in its tax provision
certain amounts in respect of taxation that involve a degree of estimation and
uncertainty where the tax treatment cannot finally be determined until a
resolution has been reached by the relevant tax authority. The carrying amount
of this provision is often dependent on the timetable and progress of
discussions and negotiations with the relevant tax authorities, arbitration
processes and legal proceedings in the relevant tax jurisdictions in which the
Group operates. Issues can take many years to resolve and assumptions on the
likely outcome would therefore have to be made by the Group
• Where appropriate, the Group has utilised expert external advice as
well as experience of similar situations elsewhere in making any such
provisions
• Determination of interest income and interest expense using the
effective interest rate method involves judgement in determining the timing
and extent of future cash flows.
Accounting policies, significant judgements and disclosures
These reviewed condensed combined consolidated financial results have been
prepared in terms of the recognition and measurement criteria of International
Financial Reporting Standards (IFRS) and the presentation and disclosure
requirements of IAS 34, "Interim Financial Reporting" and IFRS as adopted by
the UK which comply with IFRS' as issued by the IASB. At 31 March 2023, UK
adopted IFRS are identical in all material respects to current IFRS applicable
to the Group, with differences only in the effective dates of certain
standards.
The accounting policies applied in the preparation of the results for the year
ended 31 March 2023 are consistent with those adopted in the audited financial
statements for year ended 31 March 2022.
The financial results have been prepared under the supervision of Nishlan
Samujh, the Group Finance Director. The preliminary financial statements for
the year ended 31 March 2023 are available on the Group's website:
www.investec.com
Proviso
• Please note that matters discussed in this announcement may contain
forward-looking statements which are subject to various risks and
uncertainties and other factors, including, but not limited to:
- changes in the political and/or economic environment that would
materially affect the Investec Group
- changes in the economic environment caused by worsening of the energy
supply crisis
- changes in legislation or regulation impacting the Investec Group's
operations or its accounting policies
- changes in business conditions that will have a significant impact on
the Investec Group's operations
- changes in exchange rates and/or tax rates from the prevailing rates
outlined in this announcement
- changes in the structure of the markets, client demand or the
competitive environment
• A number of these factors are beyond the Group's control
• These factors may cause the Group's actual future results, performance
or achievements in the markets in which it operates to differ from those
expressed or implied.
• Any forward-looking statements made are based on the knowledge of the
Group at 17 May 2023
• The information in the Group's announcement for the year ended 31
March 2023, which was approved by the Board of Directors on 17 March 2023,
does not constitute statutory accounts as defined in Section 435 of the UK
Companies Act 2006. The 31 March 2022 financial statements were filed with the
registrar and were unqualified with the audit report containing no statements
in respect of sections 498(2) or 498(3) of the UK Companies Act
• The financial information on which forward-looking statements are
based is the responsibility of the Directors of the Group and has not been
reviewed and reported on by the Group's auditors.
This announcement is available on the Group's website: www.investec.com
Definitions
• Adjusted operating profit refers to operating profit before goodwill,
acquired intangibles and strategic actions and after adjusting for earnings
attributable to other non-controlling interests. Non-IFRS measures such as
adjusted operating profit are considered as pro-forma financial information as
per the JSE Listing Requirements. The pro-forma financial information is the
responsibility of the Group's Board of Directors. Pro-forma financial
information was prepared for illustrative purposes and because of its nature
may not fairly present the issuer's financial position, changes in equity or
results of operations.
• Adjusted earnings is calculated by adjusting basic earnings
attributable to shareholders for the amortisation of acquired intangible
assets, non-operating items including strategic actions, and earnings
attributable to perpetual preference shareholders and other additional tier 1
security holders.
• Adjusted basic earnings per share is calculated as adjusted earnings
attributable to shareholders divided by the weighted average number of
ordinary shares in issue during the year
• Headline earnings is adjusted earnings plus the after tax financial
effect of strategic actions (£169.6 million) and the amortisation of acquired
intangible assets (£16.7 million). Headline earnings is an earnings measure
required to be calculated and disclosed by the JSE and is calculated in
accordance with the guidance provided in Circular 1/2021
• Headline earnings per share (HEPS) is calculated as headline earnings
divided by the weighted average number of ordinary shares in issue during the
year
• Basic earnings is earnings attributable to ordinary shareholders as
defined by IAS33 Earnings Per Share
• Dividend payout ratio is calculated as the dividend per share divided
by adjusted earnings per share
• Pre-provision adjusted operating profit is calculated as: Total
operating income before expected credit loss impairment charges, net of
operating costs and net of operating profits or losses attributable to other
non-controlling interests
• The credit loss ratio is calculated as expected credit loss (ECL)
impairment charges on gross core loans as a percentage of average gross core
loans subject to ECL
• The cost to income ratio is calculated as: operating costs divided by
operating income before expected credit loss impairment charges (net of
operating profits or losses attributable to other non-controlling interests)
• Return on average ordinary shareholders' equity (ROE) is calculated as
adjusted earnings attributable to ordinary shareholders divided by average
ordinary shareholders' equity
• Return on average tangible ordinary shareholders' equity (ROTE) is
calculated as adjusted earnings attributable to ordinary shareholders divided
by average tangible ordinary shareholders' equity
• Core loans is defined as net loans to customers plus net own
originated securitised assets
• NCI is non-controlling interests.
Financial assistance
Shareholders are referred to Special Resolution number 30, which was approved
at the annual general meeting held on 4 August 2022, relating to the
provision of direct or indirect financial assistance in terms of Section 45 of
the South African Companies Act, No 71 of 2008 to related or inter-related
companies. Shareholders are hereby notified that in terms of S45(5)(a) of the
South African Companies Act, the Boards of Directors of Investec Limited and
Investec Bank Limited provided such financial assistance during the period
1 April 2022 to 31 March 2023 to various Group subsidiaries.
Johannesburg and London
Sponsor: Investec Bank Limited
Exchange rates between local currencies and Pounds Sterling have fluctuated
over the period. The most significant impact arises from the volatility of the
Rand. The average Rand: Pound Sterling exchange rate over the period has
depreciated by 0.8% against the comparative year ended 31 March 2022, and the
closing rate has depreciated by 14.0% since 31 March 2022. The following
tables provide an analysis of the impact of the Rand on our reported numbers.
Results in Pounds Sterling Results in Rands
Year to Year to % Neutral currency^ Year to 31 March 2023 Neutral Year to Year to %
31 March 2023 31 March 2022 change currency 31 March 2023 31 March 2022 change
%
change
Adjusted operating profit before taxation (million) £836 £687 21.6% £838 22.0% R17 055 R13 947 22.3%
Earnings attributable to shareholders (million) £805 £516 56.0% £804 55.8% R16 376 R10 481 56.2%
Adjusted earnings attributable to shareholders (million) £614 £505 21.6% £615 21.8% R12 524 R10 256 22.1%
Adjusted earnings per share 68.9p 55.1p 25.0% 69.0p 25.2% 1404c 1118c 25.6%
Basic earnings per share 85.8p 52.0p 65.0% 85.6p 64.6% 1745c 1055c 65.4%
Headline earnings per share 66.8p 53.3p 25.3% 66.9p 25.5% 1398c 1083c 29.1%
Results in Pounds Sterling Results in Rands
At 31 March 2023 At 31 March 2022 % Neutral currency^^ At 31 March 2023 Neutral At 31 March 2023 At 31 March 2022 %
change currency change
%
change
Net asset value per share 510.0p 510.0p -% 533.5p 4.6% 11 191c 9 810c 14.1%
Tangible net asset value per share 474.3p 476.6p (0.5%) 498.8p 4.7% 10 407c 9 167c 13.5%
Total equity (million) £5 332 £5 740 (7.1%) £5 696 (0.8%) R116 999 R110 410 6.0%
Total assets (million)* £57 295 £58 888 (2.7%) £61 357 4.2% R1 257 211 R1 131 872 11.1%
Core loans (million) £30 179 £29 934 0.8% £32 236 7.7% R662 205 R575 773 15.0%
Cash and near cash balances (million) £16 361 £17 161 (4.7%) £17 461 1.7% R359 006 R330 089 8.8%
Customer accounts (deposits) (million) £39 556 £40 118 (1.4%) £42 433 5.8% R867 968 R771 675 12.5%
Funds under management (million) £60 959 £63 800 (4.5%) £63 525 (0.4%) R1 337 609 R1 227 209 9.0%
^ For income statement items we have used the average Rand: Pound
Sterling exchange rate that was applied in the prior period, i.e. 20.28.
^^ For balance sheet items we have assumed that the Rand: Pound
Sterling closing exchange rate has remained neutral since 31 March 2022.
• Restated as detailed below.
Condensed combined consolidated income statement
£'000 Year to Year to
31 March 2023
31 March 2022
Interest income 3 397 341 1 951 209
Interest expense (2 101 584 (1 005 939
Net interest income 1 295 757 945 270
Fee and commission income 832 213 864 639
Fee and commission expense (52 860 (46 423
Investment loss/( income) (17 145) 27 974
Share of post-taxation profit of associates and joint venture holdings 29 149 79 556
Trading income/(loss) arising from
- customer flow 131 204 128 277
- balance sheet management and other trading activities 57 714 (21 128)
Other operating income 4 386 12 190
Total operating income before expected credit loss impairment charges 2 280 418 1 990 355
Expected credit loss impairment charges (81 089) (28 828)
Operating income 2 199 329 1 961 527
Operating costs (1 350 835) (1 233 948)
Operating profit before goodwill, acquired intangibles and strategic actions 848 494 727 579
Impairment of goodwill (890) (1 962)
Amortisation of acquired intangibles (15 160) (15 477)
Amortisation of acquired intangibles of associates (1 542) (9 249)
Closure and rundown of the Hong Kong direct investments business (450) (1 203)
Operating profit 830 452 699 688
Net gain/(implementation costs) on distribution of associate to shareholders 154 438 (2 427)
Financial impact of group restructures (4 968) -
Profit before taxation 979 922 697 261
Taxation on operating profit before goodwill, acquired intangibles and (179 704) (143 309)
strategic actions
Taxation on acquired intangibles and strategic actions 17 213 2 422
Profit after taxation 817 431 556 374
Profit attributable to non-controlling interests (12 566) (40 170)
Earnings attributable to shareholders 804 865 516 204
Earnings attributable to ordinary shareholders 764 446 475 469
Earnings attributable to perpetual preferred securities and other Additional 40 419 40 735
Tier 1 security holders
Earnings per share
Year to Year to
31 March 2023
31 March 2022
Basic earnings per share - pence 85.8 52.0
Diluted basic earnings per share - pence 82.5 50.2
Combined consolidated statement of total comprehensive income
£'000 Year to Year to
31 March 2023
31 March 2022
Profit after taxation 817 431 556 374
Other comprehensive income:
Items that may be reclassified to the income statement
Fair value movements on cash flow hedges taken directly to other comprehensive 39 717 (4 311)
income^
Fair value movements on debt instruments at FVOCI taken directly to other (48 515) (301)
comprehensive income^
Gain on realisation of debt instruments at FVOCI recycled through the income (2 960) (2 010)
statement^
Foreign currency adjustments on translating foreign operations (306 053) 173 160
Items that will not be reclassified to the income statement
Effect of rate change on deferred taxation relating to adjustment for IFRS 9 (7) 617
Fair value movements on equity instruments at FVOCI taken directly to other (657) 3 420
comprehensive income^
Remeasurement of net defined benefit pension liability 75 40
Net gain attributable to own credit risk^ 104 11 095
Total comprehensive income 499 135 738 084
Total comprehensive income attributable to ordinary shareholders 513 518 629 300
Total comprehensive (loss)/income attributable to non-controlling interests (54 802) 68 049
Total comprehensive income attributable to perpetual preferred securities 40 419 40 735
Total comprehensive income 499 135 738 084
^ These amounts are net of taxation of £6.4million taxation
expense (31 March 2022: £3.5 million taxation expense).
Combined consolidated balance sheet
At 31 March 2023 31 March 2022^ 31 March 2021^
£'000
Assets
Cash and balances at central banks 6 437 709 5 998 270 3 517 100
Loans and advances to banks 1 450 627 2 552 061 2 637 436
Non-sovereign and non-bank cash placements 644 065 684 983 439 841
Reverse repurchase agreements and cash collateral on securities borrowed 3 632 658 4 609 778 3 575 713
Sovereign debt securities 4 751 646 4 148 867 3 711 623
Bank debt securities 939 509 1 515 210 1 121 730
Other debt securities 1 229 392 1 229 287 1 364 235
Derivative financial instruments 1 386 134 1 590 513 1 683 214
Securities arising from trading activities 1 632 391 683 329 1 024 671
Investment portfolio 1 330 907 912 872 909 050
Loans and advances to customers 29 911 158 29 561 088 26 041 087
Own originated loans and advances to customers securitised 272 879 375 763 401 912
Other loans and advances 142 726 128 284 102 135
Other securitised assets 103 151 123 888 140 087
Interests in associated undertakings and joint venture holdings 53 703 734 434 679 157
Current taxation assets 69 322 33 653 60 325
Deferred taxation assets 258 126 259 370 246 622
Other assets 1 581 693 2 139 354 2 237 646
Property and equipment 278 561 335 420 329 972
Investment properties 722 481 820 555 832 061
Goodwill 262 632 258 404 259 805
Software 15 401 9 443 58 968
Other acquired intangible assets 41 136 44 152 12 574
Non-current assets classified as held for sale 35 761 79 229 51 783
57 183 768 58 828 207 51 438 747
Other financial instruments at fair value through profit or loss in respect 110 891 59 549 52 405
of liabilities to customers
57 294 659 58 887 756 51 491 152
Liabilities
Deposits by banks 3 617 524 3 178 668 2 403 712
Derivative financial instruments 2 424 036 2 581 315 2 231 166
Other trading liabilities 202 256 275 589 326 189
Repurchase agreements and cash collateral on securities lent 936 564 863 285 1 003 312
Customer accounts (deposits) 39 555 669 40 118 412 34 449 430
Debt securities in issue 1 802 586 2 043 640 1 892 319
Liabilities arising on securitisation of own originated loans and advances 163 787 238 370 160 646
Liabilities arising on securitisation of other assets 81 609 95 885 108 281
Current taxation liabilities 83 183 41 631 78 790
Deferred taxation liabilities 26 545 19 624 40 333
Other liabilities 1 873 714 2 315 841 1 951 122
50 767 473 51 772 260 44 645 300
Liabilities to customers under investment contracts 108 370 56 475 49 798
Insurance liabilities, including unit-linked liabilities 2 521 3 074 2 607
50 878 364 51 831 809 44 697 705
Subordinated liabilities 1 084 630 1 316 191 1 480 951
51 962 994 53 148 000 46 178 656
Equity
Ordinary share capital 247 247 247
Ordinary share premium 1 208 161 1 516 024 1 517 852
Treasury shares (564 678) (318 987) (267 508)
Other reserves (850 742) (650 228) (788 222)
Retained income 4 553 011 4 069 776 3 772 628
Ordinary shareholders' equity 4 345 999 4 616 832 4 234 997
Perpetual preference share capital and premium 136 259 174 869 174 053
Shareholders' equity excluding non-controlling interests 4 482 258 4 791 701 4 409 050
Other Additional Tier 1 securities in issue 398 568 411 683 335 111
Non-controlling interests 450 839 536 372 568 335
- Perpetual preferred securities issued by subsidiaries - - 72 750
- Non-controlling interests in partially held subsidiaries 450 839 536 372 495 585
Total equity 5 331 665 5 739 756 5 312 496
Total liabilities and equity 57 294 659 58 887 756 51 491 152
^ Restated as detailed below.
Condensed consolidated statement of changes in equity
£'000 Year to Year to
31 March 2023
31 March 2022
Balance at the beginning of the year 5 739 756 5 312 496
Total comprehensive income 499 135 738 084
Share-based payments adjustments 25 904 23 932
Dividends paid to ordinary shareholders (260 673) (178 418)
Dividends paid to perpetual preference shareholders included in (40 419) (40 735)
non-controlling interests and Other Additional Tier 1 security holders
Dividends paid to non-controlling interests (30 849) (29 287)
Share buyback of ordinary share capital (56 863) (36 150)
Repurchase of perpetual preference shares (19 379) (77 835)
Issue of Other Additional Tier 1 security instruments 22 787 67 552
Repayment of Other Additional Tier 1 security instruments (15 951) -
Net equity impact of non-controlling interest movements 118 443
Employee benefit liability recognised (9 224) -
Movement of treasury shares (240 008) (47 114)
Net equity movements of interests in associated undertakings - 6 788
Distribution to ordinary shareholders (282 669) -
Balance at the end of the year 5 331 665 5 739 756
Condensed consolidated cash flow statement
£'000 Year to Year to
31 March 2023
31 March 2022
Net cash inflow from operating activities 469 757 3 071 540
Net cash (outflow)/inflow from investing activities (13 993) 35 565
Net cash outflow from financing activities (914 684) (587 923)
Effects of exchange rates on cash and cash equivalents (196 806) 90 928
Net (decrease)/increase in cash and cash equivalents (655 726) 2 610 110
Cash and cash equivalents at the beginning of the year 9 099 740 6 489 630
Cash and cash equivalents at the end of the year 8 444 014 9 099 740
^ Restated as detailed below.
Cash and cash equivalents is defined as including: cash and balances at
central banks, on demand loans and advances to banks and non-sovereign and
non-bank cash placements (all of which have a maturity profile of less than
three months).
Combined consolidated segmental analysis
Segmental geographical and business analysis of adjusted operating profit
before goodwill, acquired intangibles, non-operating items, taxation and after
non-controlling interests.
Private Client
Specialist Banking
For the year to 31 March 2023 Wealth & Investment^ Private Banking Corporate, Investment Banking and Other Group Investments Group Costs Total Group % change % of total
£'000
UK and Other 91 756 70 154 233 234 18 103 (18 209) 395 038 30.5% 47.3%
Southern Africa 32 799 179 616 244 141 (323) (15 343) 440 890 14.6% 52.7%
Adjusted operating profit 124 555 249 770 477 375 17 780 (33 552) 835 928 21.6% 100.0%
Non-controlling interest* 12 566
Adjusted operating profit before non-controlling interests 848 494
% change 1.2% 8.8% 52.3% (65.8%) 8.9% 21.6%
% of total 14.9% 29.9% 57.1% 2.1% (4.0)% 100.0%
Total assets £'mn 1 225 15 662 38 880 1 528 - 57 295
Private Client
Specialist Banking
For the year to 31 March 2022 Wealth & Investment^ Private Banking Corporate, Investment Banking and Other Group Investments Group Costs Total Group % of total
£'000
UK and Other 90 593 30 828 162 825 33 387 (14 819) 302 814 44.1%
Southern Africa 32 542 198 827 150 549 18 670 (15 993) 384 595 55.9%
Adjusted operating profit 123 135 229 655 313 374 52 057 (30 812) 687 409 100.0%
Non-controlling interest* 40 170
Adjusted operating profit before non-controlling interests 727 579
% of total 17.9% 33.4% 45.6% 7.6% (4.5)% 100.0%
Total assets^^ £'mn 1 267 16 157 39 562 1 902 - 58 888
* Profit attributable to non-controlling interests predominantly
relates to the Investec Property Fund Limited.
^ Following a strategic review, our Swiss operations have been
earmarked to play a key role in the Group's strategic expansion of its
international wealth services. To ensure strategic alignment, the operational
results of the Switzerland wealth business are now reported as part of the
Southern Africa Wealth & Investment division (previously reported as part
of UK & Other Wealth & Investment). The comparative period has been
restated to reflect this change. There has been no change in the legal or
ownership structures.
^^ Restated as detailed below.
Net fee and commission income
For the year to 31 March 2023 UK and Southern Total
£'000 Other Africa
Wealth & Investment net fee and commission income 324 907 108 063 432 970
Fund management fees/fees for funds under management 287 779 66 418 354 197
Private client transactional fees* 37 128 44 614 81 742
Fee and commission expense - (2 969) (2 969)
Specialist Banking net fee and commission income 108 760 187 622 296 382
Specialist Banking fee and commission income** 123 511 219 128 342 639
Specialist Banking fee and commission expense (14 751) (31 506) (46 257)
Group Investments net fee and commission income - 50 001 50 001
Group Investments fee and commission income**(#) - 53 635 53 635
Group Investments fee and commission expense - (3 634) (3 634)
Net fee and commission income 433 667 345 686 779 353
Annuity fees (net of fees payable) 303 522 252 893 556 415
Deal fees 130 145 92 793 222 938
* Trust and fiduciary fees amounted to £0.4 million and are
included in Private client transactional fees.
** Included in Group Investments and Specialist Banking is fee and
commission income of £78.0 million for operating lease income which is out of
the scope of IFRS 15 - Revenue from contracts with customers.
# Included within Group Investments fee and commission income is a
net contribution from rental activities resulting from the consolidation of
IPF of £56.0 million comprising property revenue of £90.3 million and
property expenses of £34.3 million.
Financial impact of strategic actions
For the year to 31 March 2023 2022
£'000
Closure and rundown of the Hong Kong direct investments business^ (450) (1 203)
Net gain/(implementation costs) on distribution of associate to shareholders 154 438 (2 427)
Financial impact of Group restructures^^ (4 968) -
Financial impact of strategic actions 149 020 (3 630)
Taxation on financial impact of strategic actions 14 501 633
Net financial impact of strategic actions 163 521 (2 997)
^ In the prior year included within the balance are fair value
gains of £0.7 million.
^^ Includes transaction costs relating to the proposed combination
of Investec Wealth & Investment UK and Rathbones Group. Refer to the
events after reporting date note below.
Net gain on distribution of associate to shareholders
On 30 May 2022, c.15% shareholding in Ninety One DLC was distributed to
ordinary shareholders. The distribution resulted in the shareholding in Ninety
One DLC being reduced from 25% to c.10%. The reduction in shareholding
resulted in the loss of significant influence and the remaining stake in
Ninety One DLC will be accounted for at fair value through other comprehensive
income.
Gain on loss of significant influence of Ninety One £'000
The gain on the distribution is calculated as follows:
Fair value of the distribution 282 669
Remaining shares held in Ninety One 244 590
Derecognition of the previously equity accounted investment in Ninety One (386 019)
Foreign currency translation reserve recycled to the income statement on 13 906
distribution
Gain on the distribution of Ninety One shares before tax 155 146
Implementation costs (708)
Gain on distribution of Ninety One shares before tax 154 438
Taxation benefit (release of deferred taxation) 14 501
Gain on distribution of Ninety One shares net of taxation and implementation 168 939
costs
Balance sheet restatements
Derivative financial instruments to other assets
As at 31 March 2022, £70.7 million and 31 March 2021, £72.2 million, initial
margin on collateral, which is not available as an offset to individual
exposures, was recorded in derivative financial instruments liabilities
instead of other assets.
In addition, certain derivative financial assets and liabilities that are
managed by the Group's trading desks were previously presented on a gross
basis, while the IAS 32 on-balance sheet netting requirements were met. Due to
an upgrade of the internal reporting processes, the intent to net settle was
evidenced. The derivative transactions, totalling £14.1 million at 31 March
2023 (31 March 2022: £26.7 million, 31 March 2021: £31.5 million) satisfied
the legally enforceable right of set off in terms of IAS 32. These positions
are also operationally net settled through the use of the Continuous Linked
Settlement (CLS) system.
The comparative balance sheets have been restated for the reclassifications
above. This change has no impact on the comparative income statements. The
impact of these changes on the 31 March 2022 and 31 March 2021 balance sheets
and 31 March 2022 cash flows are:
At 31 March 2022 Restatement At 31 March 2022
as previously reported restated
£'000
Assets
Derivative financial instruments 1 617 240 (26 727) 1 590 513
Other assets 2 068 615 70 739 2 139 354
Total assets 58 843 744 44 012 58 887 756
Liabilities
Derivative financial instruments 2 537 303 44 012 2 581 315
Total liabilities 53 103 988 44 012 53 148 000
At 31 March 2021 Restatement At 31 March 2021
as previously reported restated
£'000
Assets
Derivative financial instruments 1 714 743 (31 529) 1 683 214
Other assets 2 165 438 72 208 2 237 646
Total assets 51 450 473 40 679 51 491 152
Liabilities
Derivative financial instruments 2 190 487 40 679 2 231 166
Total liabilities 46 137 977 40 679 46 178 656
The impact of this change on the 31 March 2022 cash flow statement is:
At 31 March 2022 Restatement At 31 March 2022
as previously reported restated
£'000
Operating profit adjusted for non-cash and non-operating items 816 404 - 816 404
Taxation paid (152 140) - (152 140)
Increase in operating assets (3 318 637) (3 233) (3 321 870)
Increase in operating liabilities 5 725 913 3 233 5 729 146
Net cash outflow from operating activities 3 071 540 - 3 071 540
Historical German dividend tax arbitrage transactions
Investec Bank plc has previously been notified by the Office of the Public
Prosecutor in Cologne, Germany, that it and certain of its current and former
employees may be involved in possible charges relating to historical
involvement in German dividend tax arbitrage transactions (known as cum-ex
transactions). Investigations are ongoing and no formal proceedings have been
issued against Investec Bank plc by the Office of the Public Prosecutor. In
addition, Investec Bank plc received certain enquiries in respect of client
tax reclaims for the periods 2010-2011 relating to the historical German
dividend arbitrage transactions from the German Federal Tax Office (FTO) in
Bonn. Since issuing our 31 March 2022 Annual Report, the FTO has provided more
information in relation to their claims and Investec Bank plc has sought
further information and clarification.
Investec Bank plc is co-operating with the German authorities and continues to
conduct its own internal investigation into the matters in question. A
provision is held to reflect the potential financial outflows that could arise
as a result of this matter. There are factual issues to be resolved which may
have legal consequences, including financial penalties.
In relation to potential civil claims; whilst Investec Bank plc is not a
claimant nor a defendant to any civil claims in respect of cum-ex
transactions, Investec Bank plc has received third party notices in relation
to two civil proceedings in Germany and may elect to join the proceedings as a
third party participant. Investec Bank plc has itself served third party
notices on various participants to these historic transactions in order to
preserve statute of limitation on any potential future claims that Investec
Bank plc may seek to bring against those parties, should Investec Bank plc
incur any liability in the future. Investec Bank plc has also entered into
standstill agreements with some third parties in order to suspend the
limitation period in respect of the potential civil claims. While Investec
Bank plc is not a claimant nor a defendant to any civil claims at this stage,
it cannot rule out the possibility of civil claims by or against Investec Bank
plc in future in relation to the relevant transactions.
The Group has not provided further disclosure with respect to these historical
dividend arbitrage transactions because it has concluded that such disclosure
may be expected to seriously prejudice its outcome.
Events after the reporting date
Proposed sale of the Investec Property Fund Limited (IPF) asset management
function in South Africa and Europe
Investec entered into an agreement with IPF on 1 March 2023 to sell its real
estate asset management function across South Africa and Europe, for a maximum
purchase consideration of R975 million.
Investec has carved out R125 million of the consideration in the form of an
earn-out provision, linked to the growth in the existing IPF assets under
management as at 31 March 2023, in excess of a minimum annual growth threshold
over three years.
The IPF circular relating to the proposed transaction was posted to IPF
shareholders on 17 April 2023, with the transaction being approved at a
general meeting held on 17 May 2023. The transaction is further subject to the
approval of the Competition Commission.
At the completion date of the sale, Investec will deconsolidate its c.24.3%
investment in IPF. Going forward the investment in IPF will be equity
accounted. At the date of this report, the transaction has not yet become
effective. The financial effect of the deconsolidation will be dependent on
the net asset value and fair value of the IPF share on the date of
deconsolidation, a reliable estimate cannot be made at this point.
Proposed combination of Investec Wealth & Investment UK and Rathbones
Group
It was announced on 4 April 2023 that Investec plc and Rathbones Group Plc
(Rathbones) have entered into a definitive agreement regarding an all-share
combination of Investec Wealth & Investment Limited (IW&I UK) and
Rathbones.
Under the terms of the combination, Rathbones will issue new Rathbones shares
in exchange for 100% of Investec W&I UK's share capital. On completion,
Investec Group will own 41.25% of the economic interest in the enlarged
Rathbones Group's share capital, with Investec Group's voting rights limited
to 29.9%.
The combination is conditional, among other things, on:
i. Approval by Rathbones' shareholders (by ordinary resolution) at a
general meeting of Rathbones expected to be held during quarter two of 2023,
ii. The Financial Conduct Authority and London Stock Exchange agreeing to
admit the ordinary share element of the consideration shares to the premium
listing segment of the Official List and to trading on the London Stock
Exchange's Main Market for listed securities,
iii. No material adverse change having occurred in
respect of either Rathbones or Investec IW&I UK,
iv. The Competition and Markets Authority (CMA) confirming in response to a
briefing note that it has no further questions, or alternatively, CMA
approval, and
v. Relevant financial and other regulatory approvals and notifications
being obtained, including in the UK, Jersey, Guernsey and South Africa
At the completion date of the sale, Investec will deconsolidate its 100%
investment in IW&I UK. Going forward the investment in the enlarged
Rathbones Group will be equity accounted.
At the date of this report, the transaction has not yet become effective. The
financial effect of deconsolidation will be dependent of the net asset value
of the IW&I UK business, and the fair value of the Rathbones shares on the
date of deconsolidation and a reliable estimate cannot be made at this point.
Analysis of assets and liabilities by measurement category
At 31 March 2023 Total Amortised Non-financial Total
instruments at cost instruments or
fair value scoped out of
IFRS 9
£'000
Assets
Cash and balances at central banks - 6 437 709 - 6 437 709
Loans and advances to banks - 1 450 627 - 1 450 627
Non-sovereign and non-bank cash placements 5 909 638 156 - 644 065
Reverse repurchase agreements and cash collateral on securities borrowed 961 790 2 670 868 - 3 632 658
Sovereign debt securities 3 527 223 1 224 423 - 4 751 646
Bank debt securities 612 930 326 579 - 939 509
Other debt securities 409 644 819 748 - 1 229 392
Derivative financial instruments 1 386 134 - - 1 386 134
Securities arising from trading activities 1 632 391 - - 1 632 391
Investment portfolio 1 330 907 - - 1 330 907
Loans and advances to customers 2 108 369 27 802 789 - 29 911 158
Own originated loans and advances to customers securitised - 272 879 - 272 879
Other loans and advances - 142 726 - 142 726
Other securitised assets 78 231 24 920 - 103 151
Interests in associated undertakings and joint venture holdings - - 53 703 53 703
Current taxation assets - - 69 322 69 322
Deferred taxation assets - - 258 126 258 126
Other assets 257 378 811 379 512 936 1 581 693
Property and equipment - - 278 561 278 561
Investment properties - - 722 481 722 481
Goodwill - - 262 632 262 632
Software - - 15 401 15 401
Other acquired intangible assets - - 41 136 41 136
Non-current assets classified as held for sale - - 35 761 35 761
12 310 906 42 622 803 2 250 059 57 183 768
Other financial instruments at fair value through profit or loss in respect of 110 891 - - 110 891
liabilities to customers
12 421 797 42 622 803 2 250 059 57 294 659
Liabilities
Deposits by banks - 3 617 524 - 3 617 524
Derivative financial instruments 2 424 036 - - 2 424 036
Other trading liabilities 202 256 - - 202 256
Repurchase agreements and cash collateral on securities lent 169 063 767 501 - 936 564
Customer accounts (deposits) 3 188 859 36 366 810 - 39 555 669
Debt securities in issue 21 554 1 781 032 - 1 802 586
Liabilities arising on securitisation of own originated loans - 163 787 - 163 787
and advances
Liabilities arising on securitisation of other assets 81 609 - - 81 609
Current taxation liabilities - - 83 183 83 183
Deferred taxation liabilities - - 26 545 26 545
Other liabilities 99 692 916 649 857 373 1 873 714
6 187 069 43 613 303 967 101 50 767 473
Liabilities to customers under investment contracts 108 370 - - 108 370
Insurance liabilities, including unit-linked liabilities 2 521 - - 2 521
6 297 960 43 613 303 967 101 50 878 364
Subordinated liabilities - 1 084 630 - 1 084 630
6 297 960 44 697 933 967 101 51 962 994
Financial instruments at fair value
The table below analyses recurring fair value measurements for financial
assets and financial liabilities. These fair value measurements are
categorised into different levels in the fair value hierarchy based on the
inputs to the valuation technique used.
The different levels are identified as follows:
Level 1 - quoted (unadjusted) prices in active markets for identical assets or
liabilities.
Level 2 - inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly
(i.e. as prices) or
indirectly (i.e. derived from prices).
Level 3 - inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
Fair value category
At 31 March 2023 Total instruments at fair value Level 1 Level 2 Level 3
£'000
Assets
Non-sovereign and non-bank cash placements 5 909 - 5 909 -
Reverse repurchase agreements and cash collateral on securities borrowed 961 790 - 961 790 -
Sovereign debt securities 3 527 223 3 527 223 - -
Bank debt securities 612 930 406 088 206 842 -
Other debt securities 409 644 102 035 213 677 93 932
Derivative financial instruments 1 386 134 - 1 332 950 53 184
Securities arising from trading activities 1 632 391 1 611 233 17 156 4 002
Investment portfolio 1 330 907 200 252 2 691 1 127 964
Loans and advances to customers 2 108 369 - 771 498 1 336 871
Other securitised assets 78 231 - - 78 231
Other assets 257 378 257 378 - -
Other financial instruments at fair value through profit or loss in respect of 110 891 110 891 - -
liabilities to customers
12 421 797 6 215 100 3 512 513 2 694 184
Liabilities
Derivative financial instruments 2 424 036 - 2 364 578 59 458
Other trading liabilities 202 256 154 473 47 783 -
Repurchase agreements and cash collateral on securities lent 169 063 - 169 063 -
Customer accounts (deposits) 3 188 859 - 3 188 859 -
Debt securities in issue 21 554 - 21 554 -
Liabilities arising on securitisation of other assets 81 609 - - 81 609
Other liabilities 99 692 - 47 292 52 400
Liabilities to customers under investment contracts 108 370 - 108 370 -
Insurance liabilities, including unit-linked liabilities 2 521 - 2 521 -
6 297 960 154 473 5 950 020 193 467
Net financial assets/(liabilities) at fair value 6 123 837 6 060 627 (2 437 507) 2 500 717
Transfers between level 1 and level 2
There were no transfers between level 1 and level 2 in the current year.
Measurement of financial assets and liabilities at level 2
The table below sets out information about the valuation techniques used at
the end of the reporting period in measuring financial instruments categorised
as level 2 in the fair value hierarchy:
Valuation basis/techniques Main inputs
Assets
Non-sovereign and non-bank cash placements Discounted cash flow model Yield curves
Reverse repurchase agreements and cash collateral on securities borrowed Discounted cash flow model, Hermite interpolation, Black-Scholes Yield curves, discount rates, volatilities
Bank debt securities Discounted cash flow model Yield curves
Other debt securities Discounted cash flow model Yield curves, NCD curves and swap curves, discount rates, external prices,
broker quotes
Derivative financial instruments Discounted cash flow model, Hermite interpolation, industry standard Discount rate, risk-free rate, volatilities, forex forward points and spot
derivative pricing models including Black-Scholes and Local Volatility rates, interest rate swap curves and credit curves
Securities arising from trading activities Standard industry derivative pricing model, Discounted cash flow model Interest rate curves, implied bond spreads, equity volatilities, yield curves
Investment portfolio Discounted cash flow model, relative valuation model comparable quoted inputs Discount rate and fund unit price, net assets
Loans and advances to customers Discounted cash flow model Yield curves
Other assets Discounted cash flow model Yield curves
Liabilities
Derivative financial instruments Discounted cash flow model, Hermite interpolation, industry standard Discount rate, risk-free rate, volatilities, forex forward points and spot
derivative pricing models including Black-Scholes and Local Volatility rates, interest rate swap curves and credit curves
Other trading liabilities Discounted cash flow model, Hermite interpolation, industry standard Discount rate, risk-free rate, volatilities, forex forward points and spot
derivative pricing models including Local Volatility rates, interest rate swap curves and credit curves
Repurchase agreements and cash collateral on securities lent Discounted cash flow model, Hermite interpolation Yield curves, discount rates
Customer accounts (deposits) Discounted cash flow model Yield curves, discount rates
Debt securities in issue Discounted cash flow model, Hermite interpolation, industry standard Discount rate, risk-free rate, volatilities, forex forward points and spot
derivative pricing models including Local Volatility rates, interest rate swap curves and credit curves
Other liabilities Discounted cash flow model Yield curves
Liabilities to customers under investment contracts Current price of underlying unitised assets Listed prices
Insurance liabilities, including unit-linked liabilities Current price of underlying unitised assets Listed prices
Level 3 financial instruments
The following tables show a reconciliation of the opening balances to the
closing balances for level 3 financial instruments. All instruments are at
fair value through profit or loss.
£'000 Investment Loans and Other securitised Other balance Total
portfolio advances to assets sheet assets
customers
Assets
Balance at 1 April 2022 873 708 1 252 232 93 087 179 641 2 398 668
Total gains or (losses) (30 243) 92 109 1 000 5 253 68 119
In the income statement (30 243) 92 365 1 000 5 253 68 375
In the statement of comprehensive income - (256) - - (256)
Purchases 138 597 1 692 584 - 26 056 1 857 237
Sales (45 897) (762 668) - (36 946) (845 511)
Issues 680 8 305 - - 8 985
Settlements (23 936) (983 912) (15 856) (31 148) (1 054 852)
Transfers into level 3 6 304 - - 4 746 11 050
Transfer from interests in associated undertakings^ 229 361 - - - 229 361
Foreign exchange adjustments (20 610) 38 221 - 3 516 21 127
Balance at 31 March 2023 1 127 964 1 336 871 78 231 151 118 2 694 184
^ The IEP Group and Bud Group shareholders have approved a
restructure to facilitate an exit by certain IEP shareholders, including the
Investec Group, by way of a share buyback. The restructure entails the
transfer of certain assets to a Newco, to facilitate the orderly disposal of
those assets. As a result the nature of the holding in IEP has changed to that
of a debt instrument and has been transferred to the investment portfolio line
on the balance sheet, where it is measured at fair value through profit or
loss.
For the year to 31 March 2023, investment portfolio of £6.3 million,
derivatives financial instruments assets of £4.7 million were transferred
from level 2 to level 3. The valuation methodologies were reviewed and
unobservable inputs were used to determine the fair value.
£'000 Liabilities arising Other balance Total
on securitisation sheet liabilities
of other assets
Liabilities
Balance at 1 April 2022 95 885 95 187 191 072
Total losses in the income statement 1 384 6 814 8 198
Purchases - 6 324 6 324
Settlements (15 660) (562) (16 222)
Transfers out of level 3 - (8) (8)
Foreign exchange adjustments - 4 103 4 103
Balance at 31 March 2023 81 609 111 858 193 467
Derivative financial instrument liabilities of £8 000 were transferred from
level 3 to level 2.
The Group transfers between levels within the fair value hierarchy when the
significance of the unobservable inputs change or if the valuation methods
change. Transfers are deemed to occur at the end of each semi-annual reporting
period.
The following table quantifies the gains or (losses) included in the income
statement and statement of other comprehensive income recognised on level 3
financial instruments:
For the year to 31 March 2023 Total Realised Unrealised
£'000
Total gains included in the income statement for the period
Net interest income 98 169 86 175 11 994
Investment (loss)/income (41 148) 605 (41 753)
Trading income arising from customer flow 160 1 159
Trading income arising from balance sheet management and other trading 2 996 - 2 996
activities
60 177 86 781 (26 604)
Total gains or (losses) included in other comprehensive income for the period
Gain on realisation on debt instruments at FVOCI recycled through the income 433 433 -
statement
Fair value movements on debt instruments at FVOCI taken directly to other (256) - (256)
comprehensive income
177 433 (256)
Sensitivity of fair values to reasonably possible alternative assumptions by
level 3 instrument type
The fair value of financial instruments in level 3 are measured using
valuation techniques that incorporate assumptions that are not evidenced by
prices from observable market data. The following table shows the sensitivity
of these fair values to reasonably possible alternative assumptions,
determined at a transactional level:
At 31 March 2023 Balance sheet Significant unobservable input changed Range which unobservable input has been changed Favourable Unfavourable
value changes changes
£'000 £'000 £'000
Assets
Other debt securities 93 932 Potential impact on income statement 2 702 (5 253)
Credit spreads 1.05%-1.87% 108 (254)
Cash flow adjustments CPR 14.81% 10 (10)
Other^ ^ 2 584 (4 989)
Derivative financial instruments 53 184 Potential impact on income statement 5 260 (5 136)
Volatilities 7.5%-18.9% 13 (25)
Underlying asset value^^ ^^ 3 999 (4 100)
Cash flow adjustment CPR 14.81% 6 (5)
Other^ ^ 1 242 (1 006)
Securities arising from trading activities 4 002 Potential impact on income statement
Cash flow adjustments CPR 14.17% 206 (235)
Investment portfolio 1 127 964 Potential impact on income statement 120 618 (158 986)
Price earnings multiple 5.5x-11.2x 11 718 (21 695)
Underlying asset value^^ ^^ 9 378 (20 883)
EBITDA ** 11 003 (12 331)
EBITDA (10%)-10% 21 341 (21 341)
Cash flows ** 1 915 (1 414)
Underlying asset value^^ ^^ 1 425 (3 104)
Precious and industrial metal prices (5%)-5% 1 249 (1 249)
Property prices # 45 698 (49 011)
Other^ ^ 16 891 (27 958)
Loans and advances to customers 1 336 871 Potential impact on income statement 36 255 (50 330)
Credit spreads 0.28%-5.2% 10 994 (22 971)
Property value ** 14 934 (9 659)
Price earnings multiple 3.5x-4x 4 276 (7 083)
Underlying asset value^^ ^^ 1 663 (1 841)
Other^ ^ 4 388 (8 776)
Potential impact on other comprehensive income 15 756 (31 758)
Credit spreads 0.29%-5.5% 15 753 (31 751)
Other ^ 3 (7)
Other securitised assets* 78 231 Potential impact on income statement
Cash flow adjustments CPR 14.81% 701 (669)
Total level 3 assets 2 694 184 181 498 (252 367)
Liabilities
Derivative financial instruments 59 458 Potential impact on income statement (4 098) 4 099
Volatilities 9%-18.9% (1) 2
Underlying asset value^^ ^^ (4 097) 4 097
Liabilities arising on securitisation of other assets* 81 609 Potential impact on income statement
Cash flow adjustments CPR 14.81% (351) 363
Other liabilities 52 400 Potential impact on income statement (5 561) 5 930
Property prices # (4 929) 5 298
Other ^ (632) 632
Total level 3 liabilities 193 467 (10 010) 10 392
Net level 3 assets 2 500 717 171 488 (241 975)
* The sensitivity of the fair value of liabilities arising on
securitisation of other assets has been considered together with other
securitised assets.
^ Other - The valuation sensitivity has been
assessed by adjusting various inputs such as expected cash flows, discount
rates, earnings multiples rather than a single input. It is deemed appropriate
to reflect the outcome on a portfolio basis for the purposes of this analysis
as the sensitivity of the assets cannot be determined through the adjustment
of a single input.
^^ Underlying asset values are calculated by reference
to a tangible asset, for example property, aircraft or shares.
∗∗ The EBITDA, cash flows and property values have
been stressed on an investment-by-investment and loan-by-loan basis in order
to obtain favourable and unfavourable valuations.
# Property values are the underlying input for the
valuations where the capitalisation rate when valuing these properties has
been stressed by 0.25bps.
In determining the value of level 3 financial instruments, the following are
the principal input that can require judgement:
Credit spreads
Credit spreads reflect the additional yield that a market participant would
demand for taking exposure to the credit risk of an instrument. The credit
spread for an instrument forms part of the yield used in a discounted cash
flow calculation. In general a significant increase in a credit spread in
isolation will result in a movement in fair value that is unfavourable for the
holder of a financial instrument.
Discount rates
Discount rates (including WACC) are used to adjust for the time value of money
when using a discounted cash flow valuation method. Where relevant, the
discount rate also accounts for illiquidity, market conditions and uncertainty
of future cash flows.
Volatilities
Volatility is a key input in the valuation of derivative products containing
optionality. Volatility is a measure of the variability or uncertainty in
returns for a given derivative underlying. It represents an estimate of how
much a particular underlying instrument, parameter or index will change in
value over time.
Cash flows
Cash flows relate to the future cash flows which can be expected from the
instrument and requires judgement.
EBITDA
The Company being valued earnings before interest, taxes, depreciation and
amortisation. This is the main input into a price-earnings multiple valuation
method..
Price-earnings multiple
The price-to-earnings ratio is an equity valuation multiple. It is a key
driver in the valuation of unlisted investments.
Property value and precious and industrial metals
The property value and precious and industrial metals is a key driver of
future cash flows on these investments.
Underlying asset value
In instances where cash flows have links to referenced assets, the underlying
asset value is used to determine the fair value. The underlying asset
valuation is derived using observable market prices sourced from broker
quotes, specialist valuers or other reliable pricing sources.
Fair value of financial assets and liabilities at amortised cost
At 31 March 2023 Carrying amount Fair value approximates carrying amount Balances where fair values do not approximate carrying amounts Fair value of balances that do not approximate carrying amounts
£'000
Assets
Cash and balances at central banks 6 437 709 6 437 709 - -
Loans and advances to banks 1 450 627 1 450 627 - -
Non-sovereign and non-bank cash placements 638 156 638 156 - -
Reverse repurchase agreements and cash collateral on securities borrowed 2 670 868 1 267 814 1 403 054 1 402 885
Sovereign debt securities 1 224 423 4 370 1 220 053 1 240 625
Bank debt securities 326 579 4 805 321 774 323 941
Other debt securities 819 748 137 429 682 319 676 397
Loans and advances to customers 27 802 789 13 334 165 14 468 624 14 331 553
Own originated loans and advances to customers securitised 272 879 272 879 - -
Other loans and advances 142 726 69 827 72 899 72 976
Other securitised assets 24 920 24 920 - -
Other assets 811 379 811 379 - -
42 622 803 24 454 080 18 168 723 18 048 377
Liabilities
Deposits by banks 3 617 524 873 033 2 744 491 2 765 632
Repurchase agreements and cash collateral on securities lent 767 501 162 872 604 629 630 983
Customer accounts (deposits) 36 366 810 20 291 966 16 074 844 15 992 582
Debt securities in issue 1 781 032 297 489 1 483 543 1 440 357
Liabilities arising on securitisation of own originated loans and advances 163 787 163 787 - -
Other liabilities 916 649 913 925 2 724 1 572
Subordinated liabilities 1 084 630 262 141 822 489 831 177
44 697 933 22 965 213 21 732 720 21 662 303
Investec plc
Incorporated in England and Wales
Registration number: 3633621
LSE ordinary share code: INVP
JSE ordinary share code: INP
ISIN: GB00B17BBQ50
LEI: 2138007Z3U5GWDN3MY22
Ordinary share dividend announcement
In terms of the DLC structure, Investec plc shareholders registered on the
United Kingdom share register may receive all or part of their dividend
entitlements through dividends declared and paid by Investec plc on their
ordinary shares and/or through dividends declared and paid on the SA DAN share
issued by Investec Limited.
Investec plc shareholders registered on the South African branch register may
receive all or part of their dividend entitlements through dividends declared
and paid by Investec plc on their ordinary shares and/or through dividends
declared and paid on the SA DAS share issued by Investec Limited.
Declaration of dividend number 41
Notice is hereby given that a final dividend number 41, being a gross dividend
of 17.50000 pence (2022: 14.00000 pence) per ordinary share has been declared
by the Board from income reserves in respect of the year ended 31 March 2023,
payable to shareholders recorded in the shareholders' register of the Company
at the close of business on Friday 18 August 2023.
• For Investec plc shareholders, registered on the United Kingdom share
register, through a dividend payment by Investec plc from income reserves of
17.50000 pence per ordinary share
• For Investec plc shareholders, registered on the South African branch
register, through a dividend payment by
Investec Limited, on the SA DAS share, payable from income reserves,
equivalent to 17.50000 pence per ordinary share.
The relevant dates relating to the payment of dividend number 41 are as
follows:
Last day to trade cum-dividend
On the Johannesburg Stock Exchange (JSE) Tuesday 15 August 2023
On the London Stock Exchange (LSE) Wednesday 16 August 2023
Shares commence trading ex-dividend
On the Johannesburg Stock Exchange (JSE) Wednesday 16 August 2023
On the London Stock Exchange (LSE) Thursday 17 August 2023
Record date (on the JSE and LSE) Friday 18 August 2023
Payment date (on the JSE and LSE) Monday 4 September 2023
Share certificates on the South African branch register may not be
dematerialised or rematerialised between Wednesday 16 August 2023 and Friday
18 August 2023, both dates inclusive, nor may transfers between the United
Kingdom share register and the South African branch register take place
between Wednesday 16 August 2023 and Friday 18 August 2023, both dates
inclusive.
Additional information for South African resident shareholders of Investec plc
• Shareholders registered on the South African branch register are
advised that the distribution of 17.50000 pence, equivalent to a gross
dividend of 423.00000 cents per share, has been arrived at using the
Rand/Pound Sterling average buy/sell forward rate, as determined at 11h00 (SA
time) on Wednesday 17 May 2023
• Investec plc United Kingdom tax reference number: 2683967322360
• The issued ordinary share capital of Investec plc is 696 082 618
ordinary shares
• The dividend paid by Investec plc to South African resident
shareholders registered on the South African branch register and the dividend
paid by Investec Limited to Investec plc shareholders on the SA DAS share are
subject to South African Dividend Tax (Dividend Tax) of 20% (subject to any
available exemptions as legislated)
• Shareholders registered on the South African branch register who are
exempt from paying the Dividend Tax will receive a net dividend of 423.00000
cents per share paid by Investec Limited on the SA DAS share
• Shareholders registered on the South African branch register who are
not exempt from paying the Dividend Tax will receive a net dividend of
338.40000 cents per share (gross dividend of 423.00000 cents per share less
Dividend Tax of 84.60000 cents per share) per share paid by Investec Limited
on the SA DAS share.
By order of the Board
David Miller
Company Secretary
17 May 2023
Investec Limited
Incorporated in the Republic of South Africa
Registration number: 1925/002833/06
JSE share code: INL
JSE hybrid code: INPR
JSE debt code: INLV
NSX ordinary share code: IVD
BSE ordinary share code: INVESTEC
ISIN: ZAE000081949
LEI: 213800CU7SM6O4UWOZ70
Ordinary share dividend announcement
Declaration of dividend number 134
Notice is hereby given that final dividend number 134, being a gross dividend
of 423.00000 cents (2022: 279.00000 cents) per ordinary share has been
declared by the Board from income reserves in respect of the year ended 31
March 2023 payable to shareholders recorded in the shareholders' register of
the Company at the close of business on Friday 18 August 2023.
The relevant dates relating to the payment of dividend number 134 are as
follows:
Last day to trade cum-dividend Tuesday 15 August 2023
Shares commence trading ex-dividend Wednesday 16 August 2023
Record date Friday 18 August 2023
Payment date Monday 4 September 2023
The final gross dividend of 423.00000 cents per ordinary share has been
determined by converting the Investec plc distribution of 17.50000 pence per
ordinary share into Rands using the Rand/Pound Sterling average buy/sell
forward rate at 11h00 (SA time) on Wednesday 17 May 2023.
Share certificates may not be dematerialised or rematerialised between
Wednesday 16 August 2023 and Friday 18 August 2023 both dates inclusive.
Additional information to take note of
• Investec Limited South African tax reference number: 9800/181/71/2
• The issued ordinary share capital of Investec Limited is 299 014 115
ordinary shares
• The dividend paid by Investec Limited is subject to South African
Dividend Tax (Dividend Tax) of 20% (subject to any available exemptions as
legislated)
• Shareholders who are exempt from paying the Dividend Tax will receive
a net dividend of 423.00000 cents per ordinary share
• Shareholders who are not exempt from paying the Dividend Tax will
receive a net dividend of 338.40000 cents per ordinary share (gross dividend
of 423.00000 cents per ordinary share less Dividend Tax of 84.60000 cents per
ordinary share).
By order of the Board
Niki van Wyk
Company Secretary
17 May 2023
Investec plc
Incorporated in England and Wales
Registration number: 3633621
Share code: INPP
ISIN: GB00B19RX541
LEI: 2138007Z3U5GWDN3MY22
Preference share dividend announcement
Non-redeemable non-cumulative non-participating preference shares ("preference
shares")
Declaration of dividend number 34
Notice is hereby given that preference dividend number 34 has been declared by
the Board from income reserves for the period 1 October 2022 to 31 March 2023
amounting to a gross preference dividend of 21.58904 pence per preference
share payable to holders of the non-redeemable non-cumulative
non-participating preference shares as recorded in the books of the Company at
the close of business on Friday 9 June 2023.
For shares trading on the Johannesburg Stock Exchange (JSE), the dividend of
21.58904 pence per preference share is equivalent to a gross dividend of
516.58687 cents per share, which has been determined using the Rand/Pound
Sterling average buy/sell forward rate as at 11h00 (SA time) on Wednesday
17 May 2023.
The relevant dates relating to the payment of dividend number 34 are as
follows:
Last day to trade cum-dividend
On the Johannesburg Stock Exchange (JSE) Tuesday 6 June 2023
On the International Stock Exchange (TISE) Wednesday 7 June 2023
Shares commence trading ex-dividend
On the Johannesburg Stock Exchange (JSE) Wednesday 7 June 2023
On the International Stock Exchange (TISE) Thursday 8 June 2023
Record date (on the JSE and TISE) Friday 9 June 2023
Payment date (on the JSE and TISE) Friday 23 June 2023
Share certificates may not be dematerialised or rematerialised between
Wednesday 7 June 2023 and Friday 9 June 2023, both dates inclusive, nor may
transfers between the United Kingdom share register and the South African
branch register take place between Wednesday 7 June 2023 and Friday 9 June
2023 both dates inclusive.
Additional information for South African resident shareholders of Investec plc
• Investec plc United Kingdom tax reference number: 2683967322360
• The issued preference share capital of Investec plc is 2 754 587
preference shares
• The dividend paid by Investec plc to shareholders recorded on the
South African branch register is subject to South African Dividend Tax
(Dividend Tax) of 20% (subject to any available exemptions as legislated)
• The net dividend amounts to 413.26950 cents per preference share for
preference shareholders liable to pay the Dividend Tax and 516.58687 cents per
preference share for preference shareholders exempt from paying the Dividend
Tax.
By order of the Board
David Miller
Company Secretary
17 May 2023
Investec plc
Incorporated in England and Wales
Registration number: 3633621
JSE share code: INPPR
ISIN: GB00B4B0Q974
LEI: 2138007Z3U5GWDN3MY22
Rand-denominated preference share dividend announcement
Rand-denominated non-redeemable non-cumulative non-participating perpetual
preference shares ("preference shares")
Declaration of dividend number 24
Notice is hereby given that preference dividend number 24 has been declared by
the Board from income reserves for the period 1 October 2022 to 31 March 2023
amounting to a gross preference dividend of 490.94179 cents per preference
share payable to holders of the Rand-denominated non-redeemable non-cumulative
non-participating perpetual preference shares as recorded in the books of the
Company at the close of business on Friday 9 June 2023.
The relevant dates relating to the payment of dividend number 24 are as
follows:
Last day to trade cum-dividend Tuesday 6 June 2023
Shares commence trading ex-dividend Wednesday 7 June 2023
Record date Friday 9 June 2023
Payment date Friday 23 June 2023
Share certificates may not be dematerialised or rematerialised between
Wednesday 7 June 2023 and Friday 9 June 2023, both dates inclusive.
Additional information for South African resident shareholders of Investec plc
• Investec plc United Kingdom tax reference number: 2683967322360
• The issued Rand-denominated preference share capital of Investec plc
is 131 447 preference shares
• The dividend paid by Investec plc to shareholders recorded on the
South African branch register is subject to South African Dividend Tax
(Dividend Tax) of 20% (subject to any available exemptions as legislated)
• The net dividend amounts to 392.75343 cents per preference share for
preference shareholders liable to pay the Dividend Tax and 490.94179 cents per
preference share for preference shareholders exempt from paying the Dividend
Tax.
By order of the Board
David Miller
Company Secretary
17 May 2023
Investec Limited
Incorporated in the Republic of South Africa
Registration number: 1925/002833/06
JSE share code: INL
JSE hybrid code: INPR
JSE debt code: INLV
NSX ordinary share code: IVD
BSE ordinary share code: INVESTEC
ISIN: ZAE000063814
LEI: 213800CU7SM6O4UWOZ70
Preference share dividend announcement
Non-redeemable non-cumulative non-participating preference shares ("preference
shares")
Declaration of dividend number 37
Notice is hereby given that preference dividend number 37 has been declared by
the Board from income reserves for the period 1 October 2022 to 31 March 2023
amounting to a gross preference dividend of 401.90045 cents per preference
share payable to holders of the non-redeemable non-cumulative
non-participating preference shares as recorded in the books of the Company at
the close of business on Friday 9 June 2023.
The relevant dates for the payment of dividend number 37 are as follows:
Last day to trade cum-dividend Tuesday 6 June 2023
Shares commence trading ex-dividend Wednesday 7 June 2023
Record date Friday 9 June 2023
Payment date Friday 23 June 2023
Share certificates may not be dematerialised or rematerialised between
Wednesday 7 June 2023 and Friday 9 June 2023 both dates inclusive.
Additional information to take note of
• Investec Limited South African tax reference number: 9800/181/71/2
• The issued preference share capital of Investec Limited is 24 835 842
preference shares
• The dividend paid by Investec Limited is subject to South African
Dividend Tax (Dividend Tax) of 20% (subject to any available exemptions as
legislated)
• The net dividend amounts to 321.52036 cents per preference share for
shareholders liable to pay the Dividend Tax and 401.90045 cents per preference
share for preference shareholders exempt from paying the Dividend Tax.
By order of the Board
Niki van Wyk
Company Secretary
17 May 2023
Investec plc
Incorporated in England and Wales
Registration number 3633621
JSE ordinary share code: INP
LSE ordinary share code: INVP
ISIN: GB00B17BBQ50
LEI: 2138007Z3U5GWDN3MY22
Registered office
30 Gresham Street, London
EC2V 7QP, United Kingdom
Registrars in the United Kingdom
Computershare Investor Services PLC
The Pavilions, Bridgwater Road, Bristol
BS99 6ZZ, United Kingdom
Company Secretary
David Miller
Investec Limited
Incorporated in the Republic of South Africa
Registration number 1925/002833/06
JSE ordinary share code: INL
JSE hybrid code: INPR
JSE debt code: INLV
NSX ordinary share code: IVD
BSE ordinary share code: INVESTEC
ISIN: ZAE000081949
LEI: 213800CU7SM6O4UWOZ70
Registered office
100 Grayston Drive
Sandown, Sandton
2196 South Africa
Transfer secretaries in South Africa
Computershare Investor Services (Pty) Ltd
Rosebank Towers, 15 Biermann Avenue, Rosebank
2196 South Africa
Company Secretary
Niki van Wyk
Directors
Philip Hourquebie(1) (Chair)
Fani Titi(2) (Chief Executive)
Nishlan Samujh(2) (Finance Director)
Richard Wainwright(2) (Executive Director)
Ciaran Whelan(3) (Executive Director)
Henrietta Baldock(1)
Zarina Bassa(2) (Senior Independent Director)
Stephen Koseff(2)
Nicky Newton-King(2)
Jasandra Nyker(2
) Vanessa Olver(2*)
Khumo Shuenyane(2)
Philisiwe Sibiya(2
) Brian Stevenson(1)
1 British
2 South African
3 Irish
* Appointed 18 May 2022
David Friedland stepped down from the Board on 5 August 2022
Sponsor
Investec Bank Limited
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